China's Sohu Prepares Purchase of Online Video Provider 56.com

The move is the latest sign of growing consolidation in the online video market in China

China's NASDAQ-listed online video site Sohu.com is set to buy the online video provider 56.com, media reports said, the latest sign of growing diversification as competition in the sector intensifies.

Sohu had reached a deal with the online group Renren, which will sell 56.com for around $12.9 million, the news portal qq.com reported. Renren is keen to divest itself of non-core business and focus on its flagship social networking service.

"Sohu has started paying more attention on UGC (user generated content) this year," said Xu Hao, an analyst from the iResearch consulting group.

"To buy 56.com, Sohu is looking at traffic and the 56.com operating experience. Long term, it could be complementary to Sohu's growing range of longer content, also in terms of self-made content. Regarding the rumors that this purchase will put financial pressure on Sohu, I will not comment. We should look at whether it will have a synergistic effect after the merger," Xu said.

Sohu.com declined to comment on the reports when contacted by The Hollywood Reporter.

Sohu plans to invest twice as much this year as it did in 2013 in the self-produced content business, as more and more people access content on their mobile phones and 4G starts to make an impact on the market.

China's online giants, including Baidu, Alibaba and Tencent, are launching a big push into the film business, but smaller players like Sohu and Youku Tudou are also playing a major part.